In an exclusive interview with Mercom India, Kishor Nair, CEO of Avaada Energy, discussed the impact of government policies on solar cell and module manufacturing in India and emphasized the significance of the Production Linked Incentives (PLI)  program for boosting the economy and encouraging more players to enter the industry.

Nair highlighted the potential of the C&I consumers adopting solar and Avaada’s implementation plans. He also touched upon challenges faced in the Indian market, with inter-state transmission tariffs and the decline in rooftop solar installations.

Here are the excerpts from the interview –

Q: How do you see the impact of the PLI scheme and other policy measures on the industry?

A: PLI Tranche-I and II for high-efficiency solar module manufacturing is one of the initiatives in line with the country’s goal to become net-zero by 2070 and will also open doors for more players in the renewable energy sector to venture into solar module manufacturing and bolster our economy.

Eleven bidders, including Avaada, have been selected in Tranche II, which is a testimony to the fact that there is a requirement for manufacturing solar modules in the country. Furthermore, by lowering the threshold to 100 kW for green energy open access, we believe the demand for solar energy from the commercial and industrial segment will rise many folds. So, there will be stronger market growth for solar modules in the country.

The PLI scheme is a robust measure taken by the government to bridge the gap in the production cost of solar modules and enhance their competitiveness compared to imported modules. This will support the domestic manufacturing industry and promote self-sufficiency in the renewable energy sector.

Q: Is it possible for India to be self-reliant in solar manufacturing, especially given that even if we start manufacturing cells and modules, we import all the required equipment?

A: Despite having an ALMM (Approved List of Models and Manufacturers) enlisted module manufacturing capacity of ~25 GW, the cell manufacturing capacity in India is considerably low at ~4-5 GW. On a global scale, cell manufacturing is also low, even in countries like the U.S.

The PLI program is focused on developing an integrated value chain from polysilicon to module manufacturing.

It is true that with the massive scale of technology adoption by the Chinese, equipment, and machinery for high-efficiency module manufacturing would be imported from China. Further, Chinese technical experts and professionals would be required to install the assembly lines in the Indian factories.

With silica and polysilicon being the chief ingredient and China having control over the global polysilicon market, independence from Chinese imports can’t be achieved in the immediate short-to-medium term. However, on a longer-term horizon, such reliance may get reduced drastically.

India has the world’s fifth-largest solar power capacity but relies on Chinese imports. This is the best opportunity to increase our domestic manufacturing capacity. India is largely dependent on imports of silica, but we have the potential to improve capabilities in other aspects.

Currently, solar manufacturing equipment is imported from China or Europe, but that is again a one-time exercise. Our government has already taken steps to boost local manufacturing, promoting R&D by funding and establishing research centers, and taking steps to address the shortage of skilled workers and technology.

Q: Can you tell us about Avaada’s current operation, projects in the pipeline, and its contribution to making the energy transition achievable?

A: Avaada Energy is India’s leading integrated energy enterprise with business interests across the energy transition value chain. It is one of India’s fastest-growing renewable energy companies, a top performer in the Indian RE space, and has commissioned some of India’s largest renewable energy projects.

Avaada Group has built one of India’s largest portfolios of solar power projects and aims to reach 11 GW capacity by 2025 and 30 GW capacity by 2030.

Avaada has also been recognized by Mercom as the leading utility-scale solar developer in CY 2022.

We are also pursuing multiple opportunities in the C&I segment and are in close touch with domestic and multi-national entities interested in adopting renewable energy through open access and are closing deals in the current and forthcoming quarters.

At Avaada, we strongly believe that embracing renewable energy by the C&I sector will go a long way in achieving energy transition in its true sense.

Q: What are Avaada Energy’s expansion plans in terms of capacity addition?

A: Avaada Energy is committed to achieving 11 GW capacity by 2025. The construction of the projects won through competitive bidding will commence after signing the PPA (power purchase agreements). Further, several projects dedicated to the C&I category will also hit the ground in the coming months.

In addition to the projects awarded through competitive bidding by states, Avaada Group will add firm dispatchable renewable capacity for green ammonia production.

As for diversification, Avaada is also looking forward to electrolyzer manufacturing and other green hydrogen derivatives.

Q: What are the main challenges in the Indian market with solar installations?

A:  Recently, certain states have introduced charges or restrictions for setting up projects for exporting renewable energy to other states. These include non-allotment of land for RE export projects, imposing yearly charges per MW basis, and additional fees per unit for the export of power.

We believe that such additional elements will dissuade the renewable energy project development in a country without the same renewable energy potential across its length and breadth. Such roadblocks need to be removed for the larger goal of achieving energy transition.

Additionally, problems like the theft of cables and conductors from rural areas have also become a prominent issue for developers. The issue has been brought to the notice of the MNRE and state governments for necessary action. Because no strict laws govern these actions, they are difficult to maintain.

Projects are being established in remote areas where roads are not yet fully maintained, and therefore, transportation and project setup becomes difficult. As a result, we can say that geographical barriers remain a significant challenge in establishing, maintaining, and operating projects.

Q: We have seen that rooftop solar installations have underperformed against the target. What is the reason behind this, and how can it be improved?

A: About 9 GW of solar rooftop capacity has been installed in the country, which is minimal compared to the target capacity of 40 GW. It is evident that the segment has underperformed. This underperformance is predominantly due to the challenges faced on four fronts:

Financial institutions – These institutions face obstacles such as lengthy due diligence processes, concerns about customer creditworthiness and collateral risks, limited loan options, and a lack of awareness among branch officers.

Distribution companies – Revenue loss is a potential issue, as there is excess capacity in PPAs and fixed-cost payments. There is also a lack of focus on RPO compliance, and DISCOM officers often lack adequate training.

Project Developers – Developers face several challenges, including a lack of standardized installation benchmarks, intense competition that leads to quoting unviable low rates, inadequate quality control during installations, limited availability of site data, and delays in feasibility studies and PPA signing.

Government – Policy and regulatory uncertainties have contributed to the underperformance. Delays in subsidy disbursement, frequent revisions in criteria for net metering, net billing, and gross metering, restrictions on connection limits based on sanctioned load, and distribution transformer limitations are among the key issues.

One of the other biggest impediments is the lack of awareness of the consumers and the upfront capital cost. Though multilateral institutions such as World Bank and Asian Development Bank have lent through the State Bank of India and Punjab National Bank, respectively, for the development of solar rooftop projects, the pace of capacity addition has not been attractive.

Aggregation of demand and empanelment of installers by DISCOMS has been met with enthusiasm from consumers interested in installing solar rooftop capacity. A few SERCs have also notified regulations for group and virtual net metering, which offer advantages for consumers who do not have enough roof space to install solar projects.

The state governments and their DISCOMS need to proactively adopt rooftop solar and work on addressing these challenges.